Case Study Historical Financial Analysis Lululemon

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 1

Case Study – Matrices Assignment, Lululemon Inc.

BUSI 690

Policy and Strategy in Global Competition

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Good work on this week’s assignment!

The SWOT analysis did not include the IFE and/or EFE matrix as indicated within the rubric. Also,

you provided no or little narrative analysis (articulation), as noted in an announcement and grading

rubric, for the TOWS analysis found. Ensure you provide narrative for all charts or diagrams as

noted within the grading rubric.

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 2

Case Study – Matrices Assignment, Lululemon Inc.

Lululemon Athletica Inc. is considered to be one of the leaders of athletic apparel within

the athletic market. The company makes a variety of clothing that their customers enjoy. Some

of the items include T-shirts, pants, shorts, and their popular yoga pants. The company has been

known to sell a lifestyle vice selling athletic apparel. As of February 2020, the company has 491

stores in 17 countries and an online presence on its website (Thompson & Harris, 2022).

In 1998, Chip Wilson founded the lululemon company. Chip previously owed a surf and

snowboard company and later transitioned into clothing. Starting a clothing company came to

mind when Chip was taking a yoga class in Vancouver and realized the need for comfortable

clothing while performing yoga. With no hesitation, Chip opened a yoga studio in 1998 that also

sold clothing. The company's first actual store was opened in Vancouver, Canada, in November

2000 and called Lululemon. In the store, he sold clothing that he and his wife created. With the

incredible and unexpected success that the store developed, Wilson decided to expand. He

believed that the expansion would allow him to provide quality products to people who intend to

live a healthy lifestyle. Expanding would also allow him to provide his staff members the

opportunity to experience a fulfilling lifestyle by providing them with a meaningful salary.

Today, design facilities and stores can be found in Canada, the United States, India, Israel,

China, and many other countries worldwide.

After years of being in business, it was apparent that Lululemon Apparel was starting to

become a brand name within the yoga and athletic wear world. The brand became so popular that

mall owners/operators began seeking leasing options for the foot traffic they knew would come

with the partnership.

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 3

Lululemon Inc. is very strategic when it comes to sales. The company sells its

merchandise through several retail stores and has an online presence. Five years after opening its

first store, the company had expanded and had a total of 27 company-owned stores and two

franchise stores. In 2005, the company saw its sales increase to $85 million. Wilson saw his

dreams come through by providing comfortable clothing and creating jobs for others.

To assist in the company's expansion, Lululemon had to sell 48 percent of the company

to two private investors. Due to the expansion, Lululemon Athletica Inc was born. The company

ended 2006 with 41 owned stores, ten franchise stores, net revenues of $149 million, and net

income of $7.7 million, and in 2007, the company went public. Lululemon has dominated the

athletic apparel industry and has become a brand name associated with style, sports, and fitness.

The company has built a reputation worldwide and has seen enormous revenue each year.

Existing mission, objectives, and strategies

Lululemon's mission statement states, "To elevate the world from mediocrity to

greatness." The company's mission is to "Creating components for people to live longer,

healthier, fun lives." Their mission/mission statement suggests that the company has a different

perspective from other athletic brands and any other businesses. The statement indicates that the

company wishes to give its customers a lifestyle rather than another company with a brand.

Objectives

Elevate the world by realizing its full potential. Inspire change by transforming its

industry and creating a healthier world. The company has a set of values that puts quality first.

The aim is to provide customer satisfaction and ensure the customer receives what they were told

they would receive. This shows that the brand is committed to changing as the world changes

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 4

and the styles change as they maintain their lifestyle of comfort clothing. An example of this

would be the convenience of shopping online.

Strategies

The company aims to grow the business in North America, where most of its revenue

comes from. Once the company has grown in North America, they would like to expand to other

countries even more than they are currently doing. Another strategy would be to increase their

brand awareness online and through their customer service. Another strategy the company wants

to introduce is increasing their new product technology. The company also introduced its pickup

in-store option when customers order online. Doing this gives customers the comfort of shopping

at home but still receiving the same experience of shopping in-store. The company has seen sales

increase by 45%, and direct-to-consumer revenue jumped to 155% in Quarter 2 of 2020.

New Mission Statement

• Customers: The study suggests that the company targets men and women in middle

upper class and higher. The company initially targeted women that were interested in yoga. As

the study stated, this is the case that yoga paved the way for their company to expand. In 2013,

the company aggressively took more consideration for their male customers. Their focus was an

age group of men concerned about living a healthier lifestyle.

• Products or services: The firms' major products are athletic wear and mainly catered to

their female customers. Their attire allows its customers to accomplish activities feeling

comfortable but trendy. The yoga pants that the company sells promote fitness and encourage a

particular lifestyle. Lululemon's product innovation uses updated technology that makes the

customer feel comfortable. The technology used in their products makes it easier to consume

sweat and is breathable. Their services allow them to partner with yoga studios and run clubs.

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 5

• Markets: As the case study suggests, the company continues to add Lululemon stores in

its primary United States market and as well as worldwide. The company included 16 new stores

in China throughout the years and planned to add more in 2020. The company also opened stores

in Japan, Germany, France, the United Kingdom, Malaysia, Netherlands, South Korea, and many

other countries. As clearly illustrated, the expansion allowed the company to report incredible

advancements with their strategic progress in geographical market expansion.

• Technology: As indicated in the case study, the company continues to improve

In the technological area. The company focused on creating and providing products that

introduced fabrics with technological improvements and performance-enhancing features

throughout the years. These technological upgrades to their products have assisted the company

in expanding its market share worldwide. Customers enjoy wearing Lululemon's products

because of its technology and how it makes them feel about themselves. As the company makes

new products, they continue to incorporate technology within their product lines.

• Concern for survival, growth, and profitability: The company understands that the

the only way they will survive in this market is through expansion. Direct-to-consumer sales

through their website have become a critical component for the company. As indicated in the

reading, in 2011 the lululemon's e-commerce sales increased from $106.3 million to $1.14

billion in the financial year ending 2019. During the pandemic, Lululemon's majority of retail

outlets in the domestic market were closed. Like many other businesses that figured it out,

ordering online became the way to continue profit. This showed that the company could adjust

through diversity overcome slight roadblocks and profit.

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 6

• Philosophy: The company takes its philosophy stance seriously as it aligns with its core

values and its mission. As it states, it allows "people with the components to live longer,

healthier and more fun life." Lululemon is set up to and has arranged to operate the company in

the methodology in which it is stated within their mission. The company attempts to manage its

staff ethically and encourages all to follow its motto. Ensuring the company is managed

accordingly starts with the staff then the suppliers to ensure the products are produced and sold

within company standards.

• Self-concept: Lululemon's specific product design and its processes for innovation is the

The reason it can make quality products. This is believed to be the key to its competitive

strength. Lululemon had to make well-designed products that offer a comfortable fit and

competitive pricing to be competitive and set itself apart in this competitive athletic apparel

market. Within this market, the company competes with brands such as Nike, Adidas, Reebok,

and Under Armor, as stated in the strategic group map within this paper. Additionally, the

company sets itself apart by focusing on the customer and what they want. Lululemon

understands the importance of customer relationship management and promoting brand loyalty.

This is part of their strategic market approach.

• Concern for public image: Yes, the company is responsive to community needs through

its business processes. One way it does this is by "Omni Guest Experiences." It uses a marketing

strategy that connects them with people who shop at its stores. The company creates

opportunities through communities to live "sweatlife" and live long healthy lives. Through this

avenue, people can connect. The company also takes part in dealing with environmental issues

by following environmental protection protocols in its supply chain and within the community.

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 7

• Concern for employees: es, employees are an asset to the firm. Lululemon

provides its staff members with a supportive and encouraging working environment. It aims to

encourage its employees to set goals in their personal and professional life. The employees are

valuable assets of the company, and it shows in the numerous employee programs that lululemon

offers. Some of these programs include personal development workshops and goal-coaching

courses, just to name a few.

SWOT Analysis

A successful company such as Lululemon Inc needs to identify its areas of concern. To

do so, it first needs to be identifying their issues by creating a SWOT matrix to include the four

categories. When thoroughly conducted, the chart will show the company the improvements it

needs to improve its sales or achieve sales goals.

Strength

Lululemon was created to create apparel for people to live healthier lives and have fun

doing so. The first thing someone needs prior to starting a business is vision. In 1998, Wilson

had a vision to "elevate the world from mediocrity to greatness" (Thompson & Harris., 2022, pg.

C-81). The company hoped to serve their customer at all costs and be a leader in customer

satisfaction. Understanding this, their strength is the detail they put in their clothing. Their

fabric's comfortable fit and feel has made them a trusted brand. The technology that the company

puts in its line cannot be duplicated. The clothing prevents odor as the material restricts bacteria

and can be washed often without worrying about washing away (Thompson & Harris, 2022).

Another strength the company possesses is being aware of its brand and the market. From

the date of conception, the company has never switched or changed who they were. Lululemon

Inc. has gained notoriety from its competitors as well as customers. Due to brand awareness, the

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 8

company has jumped from 40% in sales in 2020. Wilson has also created a strong relationship

within the community. The company's mission statement resonated with its core audience.

Weaknesses

The company's weaknesses may be attributes that they stressed with their strengths.

Lululemon has a reputation for creating comfortable and excellent quality clothing. This is all

too apparent because it is part of its mission statement and sales strategy. In 2013, the company

saw issues with one of their pants lines that recalled the item. Another recall occurred in 2015

where the tops were said to have an issue with the neck area. All these concerns with the clothing

did do not reflect their mission statement.

Another weakness the company has is its pricing compared to all its competitors' prices.

The company has set itself as a high-end company, while its competitors like Under Armor sell

affordable clothing with the same comfortable quality. Another weakness would be the

constraints on the company with supply chain issues.

Opportunities

When speaking of opportunities, the company has left an opening in the market for its

competitors. Through the years, Lululemon has focused on women's apparel. The company's

competitors have seen significant gains with men's athletic apparel, which has accounted for over

half of their sales. In 2020, research showed that more men are shopping for athletic gear than

women. Men are now accounting for more of the sales than women. With the growth of men's

athletic apparel, the company should try to focus on shifting its focus on capitalizing on the

recent surge of sales. CEO Laurent Potdevin stated, " Retail is evolving at an increasingly rapid

pace" Potdevin added, saying, "consumers now connect with brands in a way that is driven by

experiences, rather than transactions" (Shaw, 2016).

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 9

A great opportunity for the company would be to open more stores in the United States.

In 2020, the U.S will lead apparel sales within the market with sales of 160 billion dollars. In

2021. According to the article, "The market is growing enormously, as people are progressively

enticed by the product's capability to offer sweat-wicking and breathability and enhancement of

physical movement" (Fortune Business, 2021).

Threats

The critical threat that should be listed is the threat of other companies. The price of their

competitors is reasonable and well below that of Lululemon's. The price of yoga pants was 20%

lower than that of their competitors. Other stores also provide significant discounts that

Lululemon does not. Another threat is that Lululemon does not provide a wide range of sizes like

its competitors. The company typically caters to smaller sizes like sizes 2 to 12. At the same

time, other stores like Under Armor sell XL and XX clothing. The final threat might be the

possibility of a company creating better quality at a better price than Lululemon. The company

must remain vigilant and continue looking for better quality at an affordable cost.

SWOT Analysis Chart

Strengths (Internal Factors) Weaknesses (Internal Factors)

• Lululemon Inc. is not only one of the most prominent t and fastest Athletic

clothing apparel globally, it is also one of the

most profitable and respectable brands.

• Lululemon Inc has a signature line of Yoga apparel is often imitated but cannot be

duplicated in quality or price.

• The company leads the market in brand Awareness from 40% in 2020.

• The company has a strong relationship within the community.

• The company must deal with Recalls that goes again their mission statement.

• Clothing not fitting comfortable or pilling in the inner thigh.

• Shirt tops are a threat to safety.

• Using third-party suppliers within their distribution supply chain. Causing time delays

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 10

Opportunities (external factors) Threats (external factors)

• The company should focus on Men’s clothing to capitalize on the surge of men’s

interest in athletic apparel.

• The company should capitalize on the massive numbers that North American

generates for sports apparel by opening more

North America stores.

• Lululemon has many competitors in the athletic clothing arena, such as Under

Armor, Athleta, Adidas, and Nike.

• Many of its competitors offer more sizes of clothing. Those companies cover a more

comprehensive range of customers that

Lululemon cannot reach.

Tows Matrix

The TOW Matrix listed will assist in the strategic planning that Lululemon can use to

enhance its strengths, eliminate its weaknesses, and avoid the challenges identified within the

threats. The Matrix shows how the company can benefit from opportunities to enhance its profit

margins.

TOW Matrix Chart

TOWS MATRIX

LULULEMON INC.

Strength – S (Internal)

1. An existing Brand

2. A loyal customer base

3. Brand awareness

Weaknesses – W (Internal)

1. Company Recalls/ Brand

perception

2. Clothing issues

3. Third-party support

Opportunities – O (External)

1. Cross-selling

2. New Markets

3. New services

Strengths/Opportunities SO

Leverage the strength to

maximize the opportunities at

hand. = Attaching strategies

Weaknesses/Opportunities WO

Counter weakness through

exploiting opportunities = Build

strengths for attacking strategy

Threats – T

1. New competitors

2. Old competitors

3. Customer choices

ST Strategies

Leverage strengths to

minimize threats = Defensive

strategy

WT Strategies

Counter weakness and threats =

Build strengths for defensive

strategy

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 11

Strategic Group Map

The strategic group map of Lululemon depicts a brand that all belongs to the athletic

apparel market. The prices, the quality of the brand, and the customer's viewpoint then its reality

the group map depicts them as such. Lululemon has made a name for the brand by having good

quality products. The company also has a substantial female following. The Under Armer and

Columbia company is more well-known and caters to a broader market with more sports apparel.

Nike, Adidas, and Reebok are the signature brand. They are well known in sports and highly

marketable within sports franchises. As shown on the map, these companies are highly favored

and have a competitive edge over the other companies. The companies listed are highly

competitive and are some of the world's most recognized brands within the market. As listed,

"The annual revenue of these three competitors approaches $50 billion, with Nike achieving

revenues of more than $25 billion, Adidas nearly $20 billion, and Under Armor topping $2

billion" (Jensen et al., 2016, para. 2).

Strategic Group Map Diagram

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 12

PESTLE’s Analysis

Political

The company was able to stay ahead of the tariffs bill enacted for China. The company

has limited its exposure to China as the U.S placed a levy of 15% on most clothing from China.

The company was well ahead of the bill, shifting to other locations.

Economical

Canada remains a stable country with no significant economic issues that could affect the

companies' earnings. This also factors the pandemic that plagued the country and the rest of the

world. Its Canadian clients are willing to spend their money, and the company is thriving within

that market

Social

Certain social factors drive every market. This will determine how customers and clients

respond to the market. The company could use yoga as a feel-good experience and create an

experience for their customers. Also, In the wake of Covid-19, people stopped going to the stores

and started buying products and merchandise online. The company was able to capitalize on and

improve its online presence. Store sales suffered due to closures, but the company's online

business surged 70%, accounting for 54% of overall sales compared with 27% a year earlier

(Terlep, 2020).

Technological

The company has invested accurately in the latest technology through sound and

deliberate strategic moves. This strategic step has given the company the ability to improve the

efficiency of its product and maintain customer satisfaction. Doing this has also secured their

competitive advantage over their competitors.

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 13

Legal

Not all companies can follow all rules and regulations dictated by certain regions that

they operate in, but lululemon has followed the legal stipulations by law. They have remained

compliant with regulations as required to operate. They have avoided fines that would affect

their bottom line.

Environmental

Lululemon strives to lead from the front in limiting emissions within the atmosphere. The

company also manages its waste accurately before it goes out in the environment. They

understand that if they do not respect the environment, it may negatively affect their reputation.

PESTLE Chart

Political Economical

1. Tariffs on Chinese goods 1. Stable economy

2. COVID 19

Social Technological

1. Using Yoga as a feel-good idea across the

world.

2. COVID 19.

1. Constant technological innovations to

enhance customer satisfaction.

2. Technolgy for fit and performance.

Legal Environmental

1. Ensuring tax laws are adequate in all

regions.

1. Limit waste footprint

2. Balancing greenhouse emissions

3. Accountability for raw materials

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 14

Porter’s Five Force’s Chart

Competitive Rivalry

Lululemon has multiple competitors, and they are aware of that. Some of these

competitors are Nike, Adidas, Reebok, and Under Armor, just to name a few. As far as cost,

Lululemon prices are higher than their competitors, and the company does not provide discounts

on their product, unlike its competitors, which offer a more comprehensive range of discounts.

Supplier Power

Lululemon has a great partnership with its suppliers. This is due to having multiple

suppliers throughout different countries with which they have created a strong relationship. Due

to their strategic approach, lululemon has enforced strict ethical manufacturing practices within

the facilities.

Buyer Power

Lululemon does not offer discounts on its apparels at their main store. The company does

provide discounts on merchandise but only at their few outlet stores. The company prices on

their products are much higher than their competitors, but it is due to the material and fabrics

they use to make their products. The company states that premium raw material is what they use,

and the cost of those materials is much more than what their competitors are using.

Threat of Substitution

Many athletic gear producers within this market, such as Nike, Adidas, and Reebok.

These companies make it easier for lululemon customers to stay loyal to the company. The loyal

consumers of the lululemon company would consider these companies as substitutes. Meaning

their quality would never match up to those of lululemon.

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 15

Threat of New Entry

The possibility of new entry within the industry of high-quality athletic gear is low. This

is because the apparel market requires a large amount of capital even to begin. If a new entrant

attempted to step into the market, the new company would need much money to compete.

Porter’s Five Force’s Chart

Industry Rivalry

Nike, Adidas, Under

Armor and many others.

Legal Constraints Threat of new entrants

Bargaining power

of suppliers

Bargaining power

of consumers

Threat of substitute products

-Low entry barriers due to the internet

-No cultural barrier,

athletic clothing worn by

many

-Environmental Conditions

-increase material pricing

-relationship with

customers

-Product service

quality

-Buyer Choice

-Brand loyalty

-Product service

quality

-An attractive industry to get into.

-Trendy clothing and

comfortable.

-Many customers for that

market

CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 16

References

Fortune Business (2021). Apparel & Footwear.

https://www.fortunebusinessinsights.com/sportswear-market-102571

Jensen, J. A., Wakefield, L., Cobbs, J. B., & Turner, B. A. (2016). Forecasting sponsorship costs:

marketing intelligence in the athletic apparel industry. Marketing Intelligence &

Planning, 34(2),

https://www.proquest.com/central/docview/1776674712/DBA5DAE211F4463FPQ/6?acc

ountid=12085

Press, T. C. (2020). Lululemon withholds 2020 forecast due to COVID-19 as Q4

profits rise - BNN Bloomberg. https://www.bnnbloomberg.ca/lululemon- withholds-2020-

forecast-due-to-covid-19-as-q4-profits-rise-1.1413041

Shaw, H. (2016). Lululemon sales jump with athleticwear frenzy; Lululemon sees sales jump 14

% in Q2. The London Free Press.

https://www.proquest.com/central/docview/2232496237/FE71AA3F095B4545PQ/1?acco

untid=12085

Terlep, S. (2020). Lululemon Sales Slump on Closings. Wall Street Journal

https://www.proquest.com/central/docview/2412018933/FE71AA3F095B4545PQ/2?acco

untid=12085

Thompson, A. A., Harris, R.D. (2022) Lululemon athletica’s strategy in 2020: Is the recent

growth in retail stores, revenues, and profitability sustainable? (23RD ed.). McGraw-Hill.